A 184-count indictment was handed down yesterday against a group of bankers for falsifying mortgage documents “so that they could earn commissions and fees by ensuring that otherwise unqualified borrowers would receive loans.”

The fraudulent loans were then sold to Fannie Mae (FNMA.OB), after which they were repackaged into mortgage-backed securities and purchased by outside investors.

“We are proud to have contributed to this effort, which to date has produced multiple indictments of individuals who allegedly engaged in this significant fraud scheme,” beamed Steve A. Linick, Inspector General of the Federal Housing Finance Agency. “My office is committed to ferreting out fraud throughout the housing system, and partnering with law enforcement agencies making a similar commitment.”

Manhattan District Attorney Cyrus Vance echoed Linick’s thoughts.

“The public must have confidence that when a bank issues a loan that it later re-sells to Fannie Mae, and by extension the nation’s investors, it will engage in honest and ethical practices and follow the rules set by regulators,” he said in a statement. “Loan schemes based on fraud inevitably will unravel, as this one did. Today’s indictment re-affirms our commitment to transparency and straight dealing in the financial markets. We cannot settle for less.”

Not only did Yiu Wah Wong get pinched, the equally underwhelming arrest of someone named Wai Hung Tam — “Raymond” to his friends, apparently — was also announced.

From the DA’s office:

Charged in the indictment is YIU WAH WONG, who served as the Bank’s Chief Credit Officer, Vice President, and Underwriting Supervisor. WONG was the most senior Loan Department manager and reported directly to the Bank’s CEO. Also charged in the indictment is WAI HUNG “RAYMOND” TAM, the Loan Origination Supervisor. According to the indictment, these ABACUS managers trained lower level employees that the accuracy of loan application information was immaterial; what mattered was making sure that borrowers were able to obtain Fannie Mae-backed mortgages. Managers also encouraged loan officers and processors to be discreet by making sure that the falsified information would be believable in the eyes of the Bank’s regulator, the Office of the Comptroller of the Currency, as well as Fannie Mae.

Chief Credit Officer Yiu Wah Wong (center)

A total of nineteen people from Abacus Federal Savings have been charged with residential mortgage fraud, securities fraud, grand larceny, conspiracy, and falsifying business records, as well as a raft of related charges; eight have pleaded guilty while Wong, Tam, and nine others will go to trial.

None of the nineteen are names you’ve seen in these pages before. Have you heard of Wen Fang “Fanny” Wang? How about Jie Qiong “Michelle” Nan? Or Chi Fung “Danny” Lau?

Didn’t think so. But “Fanny,” “Danny,” and “Michelle” are, along with their colleagues, accused of representing to Fannie Mae that the loan documents “were accurate and truthful, a prerequisite for purchases made by Fannie Mae,” while they were actually “replete with misrepresentations and falsified information,” which they “often authored … themselves.”

Confidence Boosting?

Will the arrests of loan processors Wai Ching “Alice” Wong and Yuk Yin “Loretta” Lam Cheng, both accused of “helping originators concoct inflated incomes for borrowers,” do anything to boost the record low number of Americans — 15% — whom Gallup says have “a great deal” or “quite a lot” of confidence in the US banking system?

Of course! Otherwise, why would the Office of Comptroller of the Currency, Fannie Mae, IRS Criminal Investigations, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, and the Federal Housing Finance Agency Office of the Inspector General (part of the Residential Mortgage-Backed Securities Working Group formed by President Obama and Attorney General Eric Holder) have spent two-and-a-half-years on the Abacus case instead of going after people you’ve actually heard of?

There is something to be said for high-profile prosecutions (with apologies to former Abacus loan officer Xiaomin “Jane” Huang — you’re a star to someone…) in that the deterrent effect is inescapable.

“You put Lloyd Blankfein in pound-me-in-the-a** prison for one six-month term, and all this bulls**t would stop, all over Wall Street,” a former congressional aide toldRolling Stone’s Matt Taibbi last year. “That’s all it would take. Just once.” Only, they didn’t get Lloyd Blankfein this time. They got Yiu Wah Wong.

One More Thing: These Loans Have Not Defaulted

There is one more twist to the Abacus tale that defies all reasonable belief.

“The irony of this case is the majority of the loans originated by Abacus have continued to perform,” said DA Vance, “which means the monthly mortgage payments are being made by the borrowers.”

In fact, Fannie Mae actually made out on the deal.

As Abacus spokesman James Haggerty told the New YorkPost, “The bank has among the lowest default rates in the country — less than 0.50%, compared to the national average of more than 5%. And Fannie Mae made more than $100 million on these loans.’’

The District Attorney’s investigation continues. Anyone with information is asked to call the Manhattan DA’s Office at (212) 335-3600.